Question#1. Is it better to tell her ASAP about the divorce or drag on the "needing the space" time and then eventually tell her so she can handle it?
I wonder if there is a third way, where you tell her you do not have skills to handle aggression and conflict and threats of suicide by a loved one, that you have some work to do, and you are trying to learn.
There are some relationship and communication skills that can help prevent things from getting worse (members on the Improving board can work on these skills with you). Then use that time to learn the skills while gathering information about your legal situation. Doing both at once will help prepare you.
Question#2. Given my situation, is it worth hiring the best lawyer or should I go with an okay lawyer/do it myself? The lawyer says he expects this to be easy and smooth but if my wife drags him to the court and gets it to trial, he will have to charge me more money
Did the lawyer specify what your wife could do to drag things to court? Every state has a different way of doing things.
Did you learn how things work where you live, and what you would have to do in order to file for divorce?
From what you describe, it sounds like her go-to response is to threaten suicide. I would encourage you to work with members on the Improving board to figure out a way to handle things skillfully if she does this, to protect her and you. That might mean you let her know what you will do if she threatens suicide (for example, and this is just an example: "I am not skilled in knowing how to support someone who is feeling suicidal, so if you tell me you feel suicidal, I will have to call 911 because they will know how to keep you safe).
There are other phrases to say to someone with suicidal ideation that might be more appropriate based on the way she experiences SI. She is wanting to put the responsibility for her feelings on you, when in fact only she has that responsibility. The key is to use phrases that make clear what you can and cannot do, what you will and will not do, in order to keep both of you safe.